Tag Archives: United States Department of Agriculture

If you grow CORN or TOMATOES and have crop insurance ! one final REMINDER! JUNE 10TH is the final planting date for corn and tomato crop insurance policies. If you have corn or tomato crop insurance policies be sure to get your crops in the ground before the June 10th deadline or you may be subjected to late planting production guarantee reductions!

JUNE 10TH is the final planting date for corn and tomato crop insurance policies. If you have corn or tomato crop insurance policies be sure to get your crops in the ground before the June 10th deadline or you may be subjected to late planting production guarantee reductions!

ATTENTION Growers with FRUIT crop insurance!!! If you have a blueberry, cranberry, peach or apple fruit crop insurance policy, acreage reports for that policy are due JANUARY 15! If you have any questions, please contact your crop insurance agent or our office at 856-769-0090 Happy Holidays!!!!

The USDA’s projections of U.S. and world corn and feed grain supply and demand conditions presented in the May WASDEreport set the benchmark by which the corn market will judge unfolding events. Those events are continually unfolding, with some of the more important ones to be revealed this summer.
Among the factors to be revealed over the next few months, two of the most important are the rate of domestic feed and residual use and the prospective size of the 2012 U.S. crop. Feed and residual use of corn during the current marketing year is projected at 4.55 billion bushels. Use during the first half of the year, as implied by the quarterly stocks estimates, totaled 3.39 billion bushels. To reach the projection for the year, use during the last half of the year will need to total 1.16 billion bushels, about the same as consumed during the same period last year. Use in that period totaled 1.718 billion bushels in 2010 and 1.631 billion in 2009.
The projected decline in the pace of feed and residual use during the last half of the year is expected to come in the final quarter as a result of increased wheat feeding and the availability of more than the normal amount of new crop corn. Increased wheat feeding in the summer of 2011 was also expected, but did not occur. Based on the estimate of September 1, 2011 wheat stocks, feed and residual use of wheat during the summer of 2011 was at a 5-year low of 204 million bushels, 54 million less than use in the summer of 2010. Early corn planting this year is expected to result in an early harvest of a larger percentage of the 2012 crop and additional consumption of new crop corn in August. The pace of maturity of the crop will provide a gauge of the amount of corn likely to be harvested in August. The estimate of June 1 corn stocks, to be released on June 30, will provide for an estimate of feed and residual use during the third quarter of the marketing year and the level of use needed in the fourth quarter to reach the USDA projection.
A combination of large corn acreage and a projected record average yield of 166 bushels are expected to result in a U.S. corn harvest of 14.79 billion bushels this fall. That projection is 2.432 billion bushels larger than the 2011 crop and 1.698 billion larger than the previous record crop of 2009. The yield projection is 2 bushels above the trend calculation for 2012 based on the trend of the U.S. average yield from 1990 through 2010. The above-trend yield reflects the anticipated impact of a smaller than average portion of the crop planted after the optimum date for maximum yields. History suggests that a new record average yield will require below average summer temperatures and above average summer precipitation, such as occurred in 2004 and 2009. The USDA’s June 30 Acreagereport will provide estimates of planted and harvested acreage. On-going weather conditions and the USDA’s weekly report of crop conditions will provide the basis for yield projections prior to the USDA’s August Crop Production report.
Another factor that will unfold over the next few months is the prospective size of the corn and feed grain crops in the rest of the Northern Hemisphere. The USDA projects larger corn crops than those of last year in China, Canada, Mexico, and the Ukraine. Production of all feed grains is expected to be larger in the EU, Canada, China, and Mexico. The largest increases in production, however, are expected in the Southern Hemisphere as production rebounds in Argentina and South Africa. Those prospects will unfold in late 2012 and early 2013. The first USDA forecast for the 2012-13 marketing year is for record foreign feed grain production. The size of those crops will influence export demand for U.S. corn, with Chinese demand to be of special interest.
In addition to production prospects, the corn market will be influenced by the world economic and financial conditions as they impact consumer incomes and commodity demand. Domestically, the rate of implementation of 15 percent ethanol blends will also be important for corn demand as the blend wall for E10 approaches.
Conditions are in place for a very large U.S. corn harvest, a return to a more abundant stocks situation, and a return to lower prices. The magnitude of these changes is still to be determined and will unfold over an extended period. Even with higher average yields this year, substantially lower corn prices could have a disproportionately large impact on producer returns as anecdotal evidence suggests that a relatively small portion of the 2012 crop has been forward-priced at higher price levels

TO: All Approved Insurance Providers
All Risk Management Field Offices
All Other Interested Parties

FROM: William J. Murphy /s/ William J. Murphy 5/9/2012
Administrator

BACKGROUND:
Section 524(b), Agricultural Management Assistance, of the Federal Crop Insurance Act
(the Act) states that the Secretary shall provide financial assistance to producers in the
States of–Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, Nevada,
New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Utah, Vermont,
West Virginia, and Wyoming. Pursuant to section 524(b) of the Act, funding will be
made available by the Commodity Credit Corporation.
ACTION:
1. Financial Assistance Program (FAP) funding will be provided to producers in the
above identified States who purchase buy-up insurance policies (except as excluded
in paragraph 2) for the 2012 crop year with acreage reporting or inventory value
reporting dates prior to September 30, 2012.

2. Policies not eligible for financial assistance include all catastrophic risk protection
policies, and any policies or endorsements insured under the Livestock Risk
Protection and Livestock Gross Margin plans of insurance.

3. The Risk Management Agency (RMA) will provide a fixed premium reduction of
$225.00 per crop policy for eligible producers. If the total producer-paid premium
per crop policy is less than $225.00, the amount of premium reduction will be capped at 100 percent of producer-paid premium for the crop policy.
BULLETIN NO.: MGR-12-006 Page 2

4. No portion of any administrative fee will be paid under the FAP.

5. RMA is making $5.5 million available for this initiative. If participation in the FAP results in total expenditures that exceed this amount, RMA will determine a pro-ration factor to reduce the aggregated financial assistance to an amount equal to or below the $5.5 million appropriation. Approved Insurance Providers (AIPs) will reduce the amount of financial assistance using the pro-ration factor for all eligible producers and reflect the correct amount of financial assistance in the producers’ billing statements or revised billing statements (if applicable). If the pro-ration factor, when applied, results in underpayment of premium by insureds, the AIPs will be responsible for collection of any underpaid premium from the insured entity. AIPs will be required to utilize the pro-ration factor to determine accurate amounts of financial assistance to be submitted through RMA’s Policy Acceptance Storage System (PASS) or eDAS System for validation and reimbursement purposes.

6. Section 524(b)(3) of the Act provides that the total amount of payments made to a person (as defined in Section 1001(5) of the Food Security Act (7 U.S.C. 1308(5))) (before the amendment made by section 1703(a) of the Food, Conservation, and Energy Act of 2008) under this subsection for any year may not exceed $50,000. RMA will coordinate with other USDA agencies as necessary to apply this limitation.

7. No additional application is necessary to qualify for the FAP. Financial assistance will be applied automatically to all applicable crop policies which meet the eligibility criteria outlined in this bulletin, including those policies insured by written agreement, not to exceed the $5.5 million appropriation.

8. For billing purposes, AIPs will either deduct the amount of financial assistance from the producer premium on the billing statement, or note on the billing statement that the producer premium will be subject to a refund based on the final amount of financial assistance provided. In the event that participation results in the projected total expenditures for financial assistance exceeding the $5.5 million appropriation, it will be reduced on a pro-ration basis as outlined in Item No. 5 above.

9. In order to determine expenditures timely and accurately, AIPs should submit all information through the PASS or eDAS systems regarding premium by the latter of the following deadlines: a) Within 30 days after the applicable acreage reporting date or; b) Within 30 days after issuance of this bulletin.

10. At the December accounting cutoff prior to the Annual Settlement, RMA will establish an amount billable (to FSA for the FAP and to applicable state governments for any State subsidies). These billable amounts per AIP become the maximum amount that can be paid to the AIP for the applicable category.
a) RMA aggregates all AIP billable amounts to determine the total amount billed to the respective funding entity. RMA bills each funding entity as soon as feasibly possible.
b) If a pro-ration process is required due to insufficient funds availability from the funding entity, then:

BULLETIN NO.: MGR-12-006 Page 3
i. RMA will determine the pro-ration factor;
ii. RMA will calculate correct amounts based on these pro-ration factors and;
iii. RMA will notify AIPs as to the pro-ration factor to be utilized in each situation.
AIPs must submit to RMA by October 31, 2012, a list of all policies receiving financial assistance for which Appendix III information was not accepted by PASS or by eDAS prior to the October accounting cut-off date (October 12, 2012). This list in spreadsheet format must contain the following: AIP Code, State Code, Crop Year, County Code, Policy Number, Plan of Insurance, Crop Code, Coverage Level, and the amount of financial assistance for each crop policy. Please submit this list electronically in Microsoft Excel format to Lee Z. Ziegler, Economist, Reinsurance Services Division, at lee.ziegler@rma.usda.gov.
AIPs can refer to Appendix III for instructions regarding processing and reimbursement.

Every business and every person faces risks each day, but, really, What is Risk? People have different attitudes about risk. Some will wager a week’s pay at a casino, while others will hide their money under a mattress. A person’s aversion to risk is a key factor in the extent to which they will try to manage their risks. In general terms, people often think of risk as the chance of something bad happening. “Bad” and “chance” are two key elements of risk. In financial terms, risk is the possibility of financial loss.

Risk Management, in a business context, is about reducing the cost of risk, which includes the cost of managing risk. Business, including farming, is about making profits or gains. Farmers need money to make a living for themselves and their families. To make a living, farmers must take risks, investing $200,000 or more worth of seed, fertilizer, and herbicides and hoping for rain – but not too much rain. Farming is risky; one doesn’t know what the outcome will be when the crop is planted (the “chance” element), as all or a portion of the crop could be lost (the “bad” element). Because farmers are willing to take this risk, our nation has a plentiful food supply.

Don’t Risk a Lot for a Little

The first key concept of risk management can be expressed by the old saying, “nothing ventured, nothing gained.” Risk management involves asking the question, “Is the risk appropriate for the return?” Is the farmer venturing too much for too little gain, (i.e., will the farmer make enough profit to reasonably justify the risk?) The word “reasonable” is key. Usually, as people take greater risks, they seek a higher return on their investments. Banks, for example, charge higher interest rates to customers who they believe are less likely to pay back a loan. Remember, the more risk you take, the greater the reward you should expect. In short, “Don’t Risk a Lot for a Little.”

Don’t Risk More than You Can Afford to Lose

Few people think it wise for retirees to invest their life’s savings in a technology stock. If they lose, there is no opportunity to make back the loss. Who hasn’t seen movies of the gambler who loses, but just needs that last “score” to get even? It never seems to work out for this person. No matter how good the odds, sometimes bad things still happen. No one should invest more than they can afford to lose, unless they want a drastic change in their lifestyle, because sometimes they’ll lose. Ruin is the result of losing more than you can afford. Unfortunately, to support a family by farming, some farmers must face the possibility of ruin each year. Crop insurance helps reduce the chance of ruin by reducing the maximum amount of money a producer can lose. Still, in today’s economic climate, ruin is a real issue for farmers.

Know the Odds

A coin toss is a 50-50 proposition. A roll of a die is a 1-in-6 event. What are the chances that this year will bring a drought? And, if it does, how much revenue will be lost? No one knows precisely, but estimates can be made based on historical data, and these estimates can be invaluable in making an investment decision. The USDA’s Risk Management Agency (RMA) develops tools to help farmers estimate the chances of profit or loss. The odds may be in a farmer’s favor, but sometimes they still lose. That is why avoiding ruin is important—it allows a farmer to keep farming. A loss doesn’t put them out of business.

It is very important to realize that the odds of making a profit or of ruin change every year, and a losing year can make the odds of either outcome much worse the next year. “Losing years” must be paid for by borrowing or by using equity built up in good years. The greater the debt or the less equity a farmer has, the harder it will be for the farmer to pay the bills if another loss occurs. Thus, it is very important that farmers understand their true financial situation, including not only preparing cash flow projections, but also preparing a balance sheet and income statement. Remember, a farmer can have a positive cash flow and still lose money.

In Conclusion

For risk management to be effective, a farming operation must have a reasonable expectation of making a profit (assuming financial returns are important). Risk management cannot make a business that is fundamentally not profitable, profitable. Today’s most effective farm managers keep careful records that facilitate effective use of available risk management strategies designed to keep expected financial returns in line with the risks. Done well, risk management can help protect a farmer’s hard-earned money from the risks associated with farming. RMA’s mission is to encourage farmers to proactively manage their risks. Farming is risky, more so than many other businesses. For taking these risks—and feeding the world—some farmers earn a good return on their investment. Others do not. By practicing risk management, farmers can gain greater control over their risks, financial returns, and solvency.

The content for this article was adapted from “Risk and Risk Management”, a Risk Management Agency Fact Sheet available at

http://tinyurl.com/7exa3mc. Custom Ag Solutions (CAS) works with producer organizations, such as the Massachusetts FFA Association, to reach America’s beginning producers with information about risk management and Federal Crop Insurance Programs administered by the USDA’s Risk Management Agency (RMA). Look for CAS’ workshops at the upcoming Massachusetts FFA State

Convention or at your local chapter. For more information about RMA and its programs, please visit http://www.RMA.USDA.gov or, to receive information by mail, call CAS at 877-277-8094.